You are given the following information concerning Parrothead Enterprises: Debt: 13,000 6.2 percent coupon bonds outstanding, with

Question:

You are given the following information concerning Parrothead Enterprises:

Debt: 13,000 6.2 percent coupon bonds outstanding, with 15 years to maturity and a quoted price of 107. These bonds pay interest semiannually.

Common stock: 345,000 shares of common stock selling for $73.50 per share. The stock has a beta of .90 and will pay a dividend of $3.35 next year. The dividend is expected to grow by 5 percent per year indefinitely.

Preferred stock: 10,000 shares of 4.1 percent preferred stock selling at $86 per share.

Market: 12 percent expected return, risk-free rate of 3.5 percent, and a 35 percent tax rate.

Calculate the WACC for Parrothead Enterprises.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...